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cathyreisenwitz writes "The 2012 bankruptcy of Rhode Island-based video-game developer 38 Studios isn't just a sad tale of a start-up tech company falling victim to the vagaries of a rough economy. It is a completely predictable story of crony capitalism, featuring star-struck legislators and the hubris of a larger-than-life athlete completely unprepared to compete in business." Reason makes no bones about its view of this kind of public-private "partnership."

Crony Capitalism is when you use the state to get unfair private advantage. It's not like a builder who gets the state to "smooth things out" when building something for public purposes (ex. police station, highway, etc.). There are times when the government needs to help facilitate the work of private parties. This was not one of them. It was the government doing something with a marginal public purpose (the nebulous "it'll create more jobs" excuse).

Put another way, this is precisely the same sort of crap we saw Bush and Obama do with the banking sector (using public funds to secure private losses that were not incurred due to a public purpose). In either case, the government stepped in to do what the market should have done in an otherwise private transaction with minimal to no public purpose.

Put another way, this is precisely the same sort of crap we saw Bush and Obama do with the banking sector (using public funds to secure private losses that were not incurred due to a public purpose). In either case, the government stepped in to do what the market should have done in an otherwise private transaction with minimal to no public purpose.

To be fair, there's a strong public interest in the banking sector not melting down, so while we might have wanted to go about it differently, ultimately the public was going to have to stabilize the banking system and that was going to take money. The cronyism in the bailout was that we didn't then make the "guilty" parties pay for their damage or significantly fix the system.

The loan guarantees for 38 studios were just worse than usual example of local/state business "incentives" which are unfortunately quite common. They're not cronyism exactly since businesses can (and do) compete without these sorts of things, but they're typically needless giveaways of taxpayer money regardless. That being said, there are certainly areas where government investment makes sense, but this isn't one of those cases

To be fair, there's a strong public interest in the banking sector not melting down

There is. But many of the institutions that were bailed out were simply investment houses, not banks, that could have gone under without causing a lot of problems. In addition, the US government didn't have to make the rescue a big tax payer gift; they could have rescued these companies but demanded steep compensation down the road for it.

And the conditions under which the banking sector got into this state were also created

To be fair, there's a strong public interest in the banking sector not melting down, so while we might have wanted to go about it differently, ultimately the public was going to have to stabilize the banking system and that was going to take money. The cronyism in the bailout was that we didn't then make the "guilty" parties pay for their damage or significantly fix the system.

Problem is that the banking system actually did melt down and all that public money went towards propping up rich people with a lot of assets invested in these banks which otherwise would have failed. Loans were not getting made for a period of time which is basically the definition of a banking system collapse. So, what system was saved? What happened now is that a new system was created that doesn't work by any rules

"Bush and Obama do with the banking sector"sigh, No. THAT was do to lack of regulations and then needing to save the economy.

Sadly, this tends to be the on going idea popular with the mainstream media. It is, however, incorrect. It was the regulations of the banking sector that caused the banks to look for new ways to make money. ie. sub prime loans. Had the government not regulated banks they would have used the standard model of intrest rates and fees to make money. Instead, the government decided that part of the population that is high risk, needed to be given loans to purchase a home. It was the action of forcing banks

That the banks were forced to lend to low income people and that caused the problem is more of a tale than anything else. Certainly it wasn't helpful, but it was at worst a tiny percentage of the problem.

Nobody was twisting Countrywide's arm from making loans and crappy CDOs (*), but the real problem was Credit Default Swaps on the CDOs. These are a type of insurance a lender can take out on a loan (didn't even have to be a loan the lender made) wherin the insurance company would pay the loan off if the c

It was the regulations of the banking sector that caused the banks to look for new ways to make money.

So, had their been no regulations then the banks would simply overlook this new way to make money? What you're suggesting is insane. The banks will always try to make more money and will do everything they legally (and sometimes illegally) can to maximize their profits.

Regulations don't exist to screw over the banks, they exist to prevent the banks from screwing us over. Getting rid of regulations only makes it easier for the banks to do just that. I'm not saying that all regulations are good as some

Insofar as the governor making the call was a (R), and the ceo of the company involved was a notable (R) campaigner (and there was serious talk of him running as (R) for senate a few years back, for the seat Scott Brown won)... it did indeed smell of "politically motivated favor to a friend of the political party" at the time.

At a minimum, Curt probably had a leg up over other CEOs in getting in to see the governor and talk about his great company, even if the decision itself wasn't biased -- even those who are trying hard not to bias decisions directly have a hard time not having a serious bias in that they talk to their political allies a lot more than their political foes.

The article doesn't go very deep into that aspect of it though.

(disclaimer: I worked at 38, and I disagree with some aspects of the article; in particular, it fails to mention that the new (D) governor of RI jerked the company around by cancelling payments to the company which _caused_ the sudden cash crunch that pushed it off the cliff, as revenge for the above... What the crony giveth, the anti-crony taketh away. But the original deal did smell funny, and management was surely also at fault for dancing so close to the edge of a financial cliff that one failed payment from the state could push them over, so the article isn't too far off the mark.)

This article only discusses some of the investment money and where it came from. Nothing about technical or software issues, or anything about what the company was actually doing or what went wrong. That would have been the only part of interest to me. Also don't bother going to the second page of the story to read one final sentence. I swear that's done on purpose for more ad exposure or more page hits.

On a side note, entering HTML tags with the stock iPad keyboard is a major pain.

The things that went wrong weren't on the technical or software side, so there's nothing to discuss there. They made 1 complete and functional game and were working on an MMO. The money and management ARE the "what went wrong."

1) A console game -- Kingdoms of Amalur: Reckoning. Published by EA, you should still be able to buy it even with 38 gone (and it's been a year, it is probably discounted at this point; available for xbox360, ps3, pc, though if you play on a pc you should go buy an xbox controller because the keyboard/mouse control isn't that great). Got mostly good reviews, sold pretty well. It's an action-heavy-RPG, think the combat of God of War with a crunchy MMO inspired "gather piles of loot, explore a big world, do quests for lots and lots of people..." backing.

2) The Big Project the company was working on was an MMO, just titled Kingdoms of Amalur, set in the same world long afterward; you could think of Reckoning as a kind of teaser to get people excited about the world and story to lead them into the MMO. Think WoW, but with a very different art style (I can't really describe it in text, you can search for the screenshots if you care), and lots and lots of refinements. It was approximately a year from release when the company went foomp.

3) Assorted tie-ins. Yeah, just like you can get the WoW novels and comic books and action figures, there were plans for that stuff too. Obviously, those things don't get launched til after the MMO does, so they were in early-planning stage.

Technical and software issues: MMO software is big, and we were chasing a moving target. With an MMO... it's not hard to write an MMO that's better than what WoW was at launch, lots of people have done that. But to make any headway at all in the market, you've got to make something that's better than WoW is Right Now, because to attract a gamer of an inherently social game, you have to pull them not just away from the gameplay of their current game, you have to also lure them away from the circle of friends in their current game. You don't yet have a raiding guild in our game, so our gameplay/art/story/etc has to be enough better than WoW (or LotRO, or DDO or FFXIV or EVE, or whatever you are currently playing that we're trying to convince you to turn off long enough to try our game), that we can convince you to try us for long enough to get a guild going and establish those friendships in our game. That's a high bar, and in a multi-year development cycle, you have to go back several times, look at the new games and expansion packs coming out, and say "hey, WoW just came out with kung-fu panda expansion... is there anything in there that is really compelling? Is there some new piece of gameplay or UI that is good enough that we ought to match it, or is something that we can see how to do better?" If you compare the WoW UI of today to the UI of three or five years ago, there is a world of difference in usability. You don't notice it at the time, since it's growing in bits and pieces, but if you've played an MMO of today, you'd never go back to one of three years ago. Which means... Those design docs from when 38 studios first formed had to go through a lot of revision. Systems written early, we'd go back and say "oops, this needs to be seriously expanded, otherwise we'll look bad by comparison".

The last week, for example, as we watched the financial axe fall, we were running our one functional raid between sessions of watching the idiot governor holding press conferences about us. And then we'd post-mortem the run, say what was fun, with a lot of comparisons to other MMOs -- "here's why X was more or less fun than it would have been in game Y". That generated a lot of new feature/bug requests; it's often hard to tell what is going to be fun until you actually are running around in the world flinging fireballs... which is great, and very "agile", but unfortunately wrecks havoc with scheduling. In hindsight... Build in more slack in the budget/schedule to pay for revision passes, because with a game (or with art in general I guess), you're likely to do something, look at it, and see a way to improve it. Unless your goal really is to pu

This magazine (Reason) is clearly against public-private partnerships, if anything seeing them as even worse than regular purely-government projects, due to the increased potential for this kind of cronyist corruption (but still inferior, in their view, to purely private-sector endeavors). A lot of free-market conservatives see them as an improvement on purely-government projects, though: public-private partnerships are often promoted as a way to bring efficiencies of the private sector into infrastructure and development (e.g. a pubic-private partnership to build a toll road), rather than having the "big government" do it all.

Are those two different camps of the economic right? Perhaps "libertarians" versus "pro-business conservatives" or something along those lines?

The problem with public-private partnerships is the high likelihood that politics will be used to make business decisions. That will probably not produce very good results. It also opens up a huge channel for corruption, with businesses paying off politicians to send taxpayer money their way.

Even when you build a framework for these partnerships and attempt to instill checks and balances into it, it can go wrong with political pressure. Look at Solyndra. It was done through a system that had the beancounter

Are those two different camps of the economic right? Perhaps "libertarians" versus "pro-business conservatives" or something along those lines?

Most modern democracies have a fairly standard set of parties (roughly from left to right): communists, social democrats, "classical" liberals, Christian democrats, and nationalists. In the US, Democrats comprise the left end of the spectrum, Republicans the right end of the spectrum, and classical liberals sit uncomfortably in the middle without their own party. Exc

A constitutional amendment (state and federal as appropriate depending on where the scandal occurs) allowing Qui Tam lawsuits against elected officials whose allocations a reasonable person would say are for private benefit. Let the legislators and governor be personally liable for these costs and suddenly you'll see the entire body militantly opposed to bailouts, "investments," etc.

Heck, it already has precedent in a way at the federal level. If a member of the civil service knowingly tasks a contractor to

Mr. Bloody Sock was a fantastic athlete but a complete meathead. Anyone who invests in any pro athlete's business plan has a financial death wish. You can count the number of really successful jocks-turned CEOs on a digit-challenged hand. (I'm not counting those who get rich off permanent endorsement deals)

Looks like baseball player Kurt Schilling (who apparently was very good at baseball) decided to start a video game studio, who knows why.

He tried to raise $50million from private investors, but they didn't think he could make money.
He went to the governor to get some money, but the governor didn't think he could make money.
A new, naive governor was elected in Rhode Island, and desperate to improve the economy of the state, he approved some $75million in loan guarantees.

They hired some people, built the game Kingdoms of Amular: Reckoning [wikipedia.org], and did a surprising number of things right considering a baseball player was the founder.

It turns out that in making a modern game, one of the hardest things is getting good developers in the right places, and the game turned out to be buggy. Very buggy. And they didn't have a good level designer, so the levels were kind of boring. These things combined to sink the game.

Oh, you're right, I misread this collection of compound sentences from the article:

Donald Carcieri (R-R.I.), term-limited and searching for a legacy after presiding over one of the worst state economies in the U.S., featuring long spells of double-digit employment and frequent last-place finishes in rankings of business friendliness. In a classic spasm of "do something, anything" government desperation, Carcieri made it his mission to lure 38 Studios from its headquarters in Maynard, Massachusetts to Rhode Island.

TL;DR: Big shot "idea man" makes the most common rookie mistake by trying to make some huge MMO as his first project. These always fail, no big surprise.

They should have made some smaller less financially risky games first to get some experience, but since he already had money he was able to make it further than most 1st time game devs with stars in their eyes do. You wouldn't believe how common it is to see this same "idea-man" BS anywhere newbie game devs gather: "Guys, I have this amazing idea for my 1st game, it's going to be a MMORPG that blah blah blah" The most common response is: "Can you make a match 3 game yet? Block dropping game? How about a Chase-Maze game? A pixelated platformer? If not, do those first. Put the huge game on the back burner kid until you know how much work that's going to be."

What's ridiculous is that EVERYONE in the game industry but newbs knows that doing something as big as a MMO or Tactical FPS as your first project is folly. Seems to me the Rhode Island investors didn't ask ANYONE with experience in games if they thought it was a good idea to invest. That's the point about "Crony-ism" I'd be driving home. Protip: Don't fund a Kickstarter made by folks with no prototype to show -- a working demo if it's their 1st game; Famous folks are a different story, but only if they got famous doing the kinds of things they want you to fund.

Urgh, we had that thread over and over again on the Irrlicht 3D engine forums, with Sparks McGee types rocking up clutching their Great Plan for writing The Ultimate MMO. All they needed were some devs to do the easy bit, writing the code and stuff.

Granted, better games wouldn't get made without people trying the impossible, but extraordinary claims require extraordinary proof. Until you've got a playable alpha, you've got nothing. You can't play an idea.

Schilling was not only very good at baseball, but was a legend in New England for helping win a World Series for the Red Sox while pitching with an ankle that was hours from surgery replacing a snapped tendon with one from a cadaver, which wasn't healed, and bleeding profusely throughout the game. This put him in a pantheon usually reserved for mythological creatures in the minds of people in the region (who were Red Sox fans, at least). I assure you, this isn't an exaggeration.

The general consensus in RI is that Carcieri (who had come into office on the platform of being a business man and knew how to fix the state, and in his first term ran a "Big Audit" to find waste in govt which is what earned him a second term) and other RI politicians were enamored with Schilling and his World Series championship rings, seeing him as a winner they could invest in. No one in RI govt had any clue about the video game industry, and RI's tech history was nary more than a couple college research shops and branches and subdivisions of companies located elsewhere. No one in government there could understand what they we're approving.

The new governor, Lincoln Chaffee, sought out video game industry insiders for advice when 38 Studios was melting down, unlike anyone else before him, and quickly came to realize that this ship was sunk, and not worth putting money into. Chaffee was critical from the start (not because it was video games, but because of the loan going to one place), and has come out of this looking prophetic, and will certainly win re-election in 2014.

Its not a surprise that this didn't work to anyone who did a little homework, but it was sad to see it all go down as it did. The truly sad part is that RI is becoming an anti-tech state as a result, and is going to end up scaring away more business and people as a result. It's a worst case scenario.

Looks like baseball player Kurt Schilling (who apparently was very good at baseball) decided to start a video game studio, who knows why.

Actually the "why" is known. Hubris. Schilling has an ego the size of Texas. Think Rush Limbaugh who happens to pitch major league baseball and you've got an idea. Schilling was very good at his sport and is on the bubble for the Hall of Fame, meaning you can make a case both for and against him going into the Hall. But you have to be really good to even be on the bubble.

Schilling's arrogance made him a great pitcher but in real life he sees everything in black and white. There are no gray areas

And one of the proposals for projects for 2013 was a video game/console. I mentioned that the half dozen of us there could probably have down with 38 Studios couldn't and it wouldn't have cost the state taxpayers $125 Million.

Capitalism is easy. You don't even have to make a product to get rich.

Lets face it, a large number of start-ups offer a good idea and nothing more. The owners get millions from capital investors to simply "try" and develop an idea. When that idea fails they shrug their shoulders and blame everyone else. Then they ensure their "parachute" fund of a few million is secured nicely in some offshore bank account and move to Belize and retire, maybe even kill a few neighbors or something.

Neither the article nor the summary says anything that could even be remotely interpreted as an attack on capitalism. And you know it.

Strawman arguments are lies.

Not to mention that this entire deal had nothing to do with capitalism. Government guarantees a giant loan to a business driven by nepotism, greed and lies in an erratic industry headed by a former sports star with no management experience whatsoever? How is that capitalism?

And the folks running Solyndra et al were committed Democrats. Selectively portraying only (R) as being greedy evil capitalists is disingenuous at best. BOTH The (D) and (R) parties are corrupt beyond repair. Government should not be making loan guarantees for businesses, period.

Solyndra was not only in an industry with a lot of competition, solar cells is an industry considerably older, more stable, and better understood than video games. FWIW, one of the reasons Solyndra failed is inferior technology (according to Rogers of Cypress Semiconductor).

I think it's important to note that Schilling has always come out (publicly at least) against public money. He's a classic anti-big-government, pro-free market guy."Schilling spent no small amount of time in his career preaching the Republican mantra of smaller government and personal responsibility. He did this fresh off the historic Red Sox World Series win when he backed George W. Bush in the 2004 campaign. He did it on the stump on behalf of John McCain in 2008.He did it for Scott Brown in January 2010

Not to mention that this entire deal had nothing to do with capitalism. Government guarantees a giant loan to a business driven by nepotism, greed and lies in an erratic industry headed by a former sports star with no management experience whatsoever? How is that capitalism?

Capitalism is the private ownership of the means of production.

When the VCs took a look at Schilling's plan said it sucked balls, that was capitalism in action.

When the RI governor went to lick Schilling's schlong and suck his balls, that was definitely NOT capitalism.

Private ownership has zero to do with government investment in this situation. It is the act of direct ownership that those worda apply to. If the government guarantees a loan it isn't involved in the ownership of the business and once again is still acting in a capitalist way. The government can act as a bank or investor if they so desire and still remain capitalist because they weren't taking ownership or using the investment to enhance the life of the workers. It was using the public welfare clause o

Bullshit. The program that Solyndra got there money was started under Bush in 2005 but the credit committee voted against the loans on Jan 9 2009, before Obama took office. The Obama admin reversed this and granted the loans.

Capitalism is generally viewed as an owner or investor introducing CAPITAL to produce a product or service, generally called a business. The investor can be the government or a private entity. This is a rather perfect example of capitalism. In fact it is still a form of mixed market "free capitalism" most of the modern world commences in. The issue was the business plan wasn't sound. It made no difference where the money came from.

This is an instance of/.'s poor understanding of economics clouding the

Reason, a libertarian magazine, is probably the most pro-capitalism publication currently available. The article is about how taxpayer-funded loans are almost always a bad idea. Schilling was unable to find private sector investors - which usually means that the business model is not very good. Crony capitalism is not capitalism, it's a corruption that wastes a whole boatload of our tax money.

Short story: Leave investing to investors and stop risking taxpayer money on ventures that will most likely not succeed.

The regulation we applied to capitalism made higher standard of living for a population.

You might want to actually read up on capitalists.

"Tax payer money was wasted by loaning it to a business nobody else would touch."while true with studio 38, usually that isn't true.In fact, a lot of case it as helped. but success in government isn't really reported. You know why? it's not unusual.

The regulation we applied to capitalism made higher standard of living for a population.

You might want to actually read up on capitalists.

"Tax payer money was wasted by loaning it to a business nobody else would touch."
while true with studio 38, usually that isn't true.
In fact, a lot of case it as helped. but success in government isn't really reported. You know why? it's not unusual.

I think the argument is more one of "should government be investing in not-for-public-use private entities?" rather than one of regulation. Regulation is setting boundaries for capitalism to live within - it's generally a good thing. Government investment in the private sector, however, is something that needs to be monitored. It makes sense when investing in private companies to the end of the public good (military spending, roads, "utilities"), but that's about it.

In fact, a lot of case it as helped. but success in government isn't really reported. You know why? it's not unusual.

To use your words: wrong.

First, people talk a lot about this, in particular in economics. The question is: what is the multiplier on government spending? Is it negative, less than 1, or greater than 1? Nobody has a conclusive answer to this, and it depends a great deal on what the money is spent on. Even very simplistic econometric or Keynsian-style estimates often come out less than 1, but

Last I read the multiplier effect on government spending was 7. It is perhaps lower now due to the economic downturn but through the last 50 years of US history it hovered between 5 and 7. So why don't you get your economists out who aren't absolute free marketers who can offer real proof and I'll get mine.

The regulation we applied to capitalism made higher standard of living for a population.

You might want to actually read up on capitalists.

"Tax payer money was wasted by loaning it to a business nobody else would touch."
while true with studio 38, usually that isn't true.
In fact, a lot of case it as helped. but success in government isn't really reported. You know why? it's not unusual.

All things in moderation I suppose.

In a framework of fair rules (Fair being about equally treated, not equal outcome) , Capitalism is the best route to the creation of wealth for the betterment of all. But it works best with the minimum of rules, and is most effective at generating wealth when taxes are as low as possible. Government doesn't work that way. Ever heard about the $500 toilet seat or $1,000 hammer?

Government has no business being IN business or partnered with for profit businesses in any way f

A specious claim; there are no sources to back your claim. Regulations exist to (a) so the people in charge get their cut, and (b) fix the problems caused by previous regulations while maintaining (a).

A real free market would not cause the problems that governments purport to solve. Read up on AT&T's history for an example. There were hundreds of independent phone operators around the country, all getting along in spite of having different hardware standards and different protocols. All their diffe

No, I don't know what EPA regulation I'd break with a lemonade stand. But unless you point it out, I'm going to guess none.

If you CAN'T point out the exact line of regulation and link to a source I can verify (You know a real one, not some talking head blog), then you're just making shit up and fear-mongering. Because you FEEL like the EPA is over-regulating and you've heard other people bitch about the EPA and lemonade stands.

And you know what? There probably ARE a lot of bad little things that the EP

The Clean air and water act was a knee jerk reaction to a problem that could have easily been solved with just the court system. It continues to cause many business to hire teams of lawyers just to insure they meet the letter of the law. It does very little to actually prevent pollution and cost tax payers and businesses far too much.

It is one thing to require businesses to not pollute beyond a certain level. It is a completely different thing to dictate how they will accomplish that process.

Please don't confuse regulations with government provided service. Reual electrification was nothing more that the government paying for the rural communities to have electricity. It was not a regulation of private business.

But not so much this part. Think mid-19th century industrial revolution, where people worked long hours, with no benefits, no labor restrictions (rampant child labor), no concern for safety, etc. Unrestrained capitalism isn't so great for the workers. It leads to sweatshop conditions we see in other countries.

Don't say sweatshop! The Libertarians have Youtube videos for everything, including one where a libertarian lectures us dirty statists on how wonderful it is to have the opportunity to work in a sweatshop.

The regulations that allowed Unions, prohibited child labor, and mandated work place safety are not in question here.

The unnecessary financial involvement of government in a for profit enterprise is however the problem. Government is horrible at acting like a business because there is no natural force to improve efficiency or foster innovation. A business will go bankrupt if it is not able to be efficient enough so there is ample motive and outside forces that lead to innovation in efficiency. Businesse

Aye, a horrible system, but the best we have. Under certain conditions it works great.
And that condition is a free market. One with rational informed agents.

But guess what late-stage capitalism looks like? Feudalism. Someone starts to WIN. They own their turf and dictate what happens there. When there's just one guy in a market who bought out everyone else, that's a monopoly. The market is no longer free. It's owned. Sometimes bigger fish try to invade and take over their markets, and everything gets ugly. Now, since monopolies have been an obvious problem, they don't do that anymore. A group decides they're going to kinda-sorta compete and pay lip service the free market because otherwise uncle Sherman whips out his trust busting hammer. But if any of them get rich enough and/or powerful enough you're looking at regulatory capture.

But hey, where there's competition, low barrier to entry, a lack of natural monopolies, and moderately sane customers... yeah capitalism is great.
For everything else, there's regulation. To varying degrees.

I think the article is a bit too simplistic and doesn't really address the danger to a private business doing business with government and also the idiocy of structuring this as a loan rather than as a investment. Given the company had no income and not enough collateral it should have never been structured as a loan. Whether you are an individual, a bank or the state of Rhode Island, you shouldn't be giving out loans to people or businesses that clearly don't yet have the means to pay you back. 38 Stud

Crony capitalism is what actually happens when you implement captialism in the real world. Capitalism is the theory, cronyism is the practice.

Well, yes, in the sense that crony capitalism is what happens when various people try to "fix" capitalism by "protecting jobs" or "attracting business" or whatever, and politicians (both on the left and the right) have delusions of grandeur of being able to do this.

The solution, however, is not to get rid of capitalism, but to get rid of attempts to tinker with it. Let businesses fail and don't have the government "invest" in companies, period.

I mean, what alternative did you have in mind? If you don't like markets deciding where to put money and resources, and giving the responsibility to government leads to cronyism, who is left to make those decisions?

Crony capitalism is what actually happens when you implement captialism in the real world. Capitalism is the theory, cronyism is the practice.

Crony capitalism is what you get when government gets too big for its pants and big enough to get involved with things that are not the proper role of government. Crony capitalism requires an out of control government and it cannot exist without it.

Government is and always has been the problem and at best a necessary evil that must be constantly kept in check.

The definition of cronyism is rewarding your allies or dependents with benefits they did not earn or deserve. Usually crony capitalism is used as a buzzword to attack government since 2009 due to the relationship Barack Obama has with Chicago and the imagined relationship he has/had with the supposed Chicago political machine.

Now in this case we're looking at a government that barring some hidden kickback that directly rewarded a government official as just a bad loan. It cannot be "crony

Crony capitalism is what actually happens when you implement captialism in the real world. Capitalism is the theory, cronyism is the practice.

In the same way that socialism is the theory, and communism is what happens when you implement it.

I could go on with other ideologies, but I'm trying very hard not the get a Godwin point here, so I'll end this way: Maybe we're all fallible so the people at the top will always end up being greedy and corrupt. But then there's no good way of "governing", and for the moment capitalism has given more people a chance than any other before so I'll keep that for now thanks.

No, that is not a free market at all. That's an extremely well-regulated market. Think of the term "free" as anarchistic in that anything goes barring violence and perhaps that as well. Free markets can't exist because people will go one of two ways, cheat to raise their own profits as an individual or use a trust-like syndicate to protect their interests against consumers. The race to the bottom in prices almost never occurs because the boom-bust cycle eventually plays out to a few huge players who inevitably dominate the market. It happened in trains, steel, the agricultural world, and even consumer electronics.

Regulations when used correctly create a more competitive playing field. There are those who argue the opposite but they base ir on unbending human greed which is a bad argumentative stance as it is a volatile subjective ideal.

This is what the parent poster is talking about, the picture isn't being missed. In theory, capitalism utilizes self-interested parties to direct scarce economic resources towards their most productive uses.

However, in practice, self-interested parties use any means available to get ahead, and that means if they can pull in government money to back their risky investment instead of having to get others to front their money, they'll do it.

In reality, economics, politics, and society are inseparably inter-linked. Changes to any one of these factors means changes in the others. Capitalism is useful as an economic theory for debate, but the undesirable side effects that pure capitalism has in practice means that society gets pissed off by the fallout, and invokes politics to restrain unbridled capitalism's effects. Pure free market capitalism isn't really used anywhere in the world because reality naturally invokes society and politics to bring the system to find an equilibrium, thus we find ourselves with the many different implementations in different countries and markets.

Excess government waste also pisses off society, and politics gets used to cut back on the policies that led to such waste. It's not a foolproof system, but you can be sure that the current local government officials are not in a hurry to fund another 38 studios given the recent backlash. They will abstain for the time being until public outcry dies down a bit.

Crony capitalism is different than capitalism. Crony capitalism means a company gets special favors from the government that give it an advantage over their competition. Crony capitalism is why, despite a 35% corporate tax rate, some corporations (like Whirlpool [google.com]) paid no or negative taxes last year. Arguably one of the best things Reagan did was to simplify the tax code to get rid of a lot of crony capitalism (to be fair the idea was being heavily promoted by a democrat before being picked up by Reagan).

In general, crony capitalism==bad. Capitalism==good. This is something agreed on by both parties: both sides hate the crony capitalism of the other side, but tolerate it.

Once again, I refer back to cronyism. You need to receive a direct benefit from the reward you're giving. The negative tax rate for some large corporations is more a reflection of poor tax codes and 20 years of pro-business legislators at the federal level.

This whole argument smacks of no true scotsman because they cannot accept anything but their ideologically pure point of view.

This whole argument smacks of no true scotsman because they cannot accept anything but their ideologically pure point of view.

Who exactly is 'they?' What argument are you talking about exactly here?

You clearly don't understand how tax law gets written. No law ever says, "this tax applies specifically to Walmart." But just as assuredly, companies do lobby, and do get tax breaks written especially for them. Or loan guarantees.

The disclosure notice said 38 Studios employed 379 full-time workers as of March 15, with 288 of them in Providence and the rest at its other studio in Maryland. The company also reported 34 full-time contractors and eight interns. The company listed 18 job openings on its website as of Monday evening.

Almost 400 people - I guess average salary must have been in the $30-$40K range.

Rent at some of the most expensive office space in Rhode Island, equipment & toys, travel & entertainment expenses...i.e. they peed it away like most idiots who have never run a business and who all of a sudden have a ton of cash.

Average Manhattan commercial realestate is $58/sq ft on an annual basis, round it up to $60 or $5/month. Average cubicle is 8x8, assume a really inefficient layout of half cube half shared space, you get 128sq ft per employee or $256k per month. The numbers aren't coming close unless someone on top is taking a hell of a lot out of the company or they're spending a good part of the loan on bribes.

No, purchase prices are around $1,100/sq ft no way is anyone getting $720/sq ft for annual rent! Your valuation would put a 500 sq ft loft at about $10.8M, I know Manhattan can get crazy but it's not that crazy =)

That seems like a truly humongous amount to be spending just to maintain a dev team (including graphic artists presumably) and a decent office space (or even a posh one). It's the kind of cash that makes you wonder who got the special contract so they could siphon money out of the state treasury. It seems quite possible that the studio was intended to fail (not necessarily intended by Schilling).

If they had actually delivered a product that was expected to sustain their operational expenses, and if that product had failed to sell due to a rough economy, then I would agree with the comment in the summary.

You could argue that the gaming economy is always, or has lately (last ~decade) been a rough economy. Perhaps this was merely in reference to the lack of fluid capital in the markets that then pushed them toward the $75 million dollar gauranteed loan - that wasn't fully theirs and that they had to make huge payments on right away... I seem to remember reading an article about it last year that said they only received about half of that money. Anyway, they did deliver a game that was "expected" to sustain th

I think the summation is that Reason being a politically drive ideologue magazine they have a skewed point of view that cannot be trusted to be objective. Especially since they seem to want to take the failure on the state level and apply it broadly to all levels of government.